BBVA is at 10% annual minimums in full escalation of tension due to the takeover bid

BBVA is at 10% annual minimums in full escalation of tension due to the takeover bid
BBVA is at 10% annual minimums in full escalation of tension due to the takeover bid

BBVA shares are trading on the edge of 9 euros, after chaining a bearish streak that led the value to be trading just 10 percent above the annual lows set last January at 8 euros.

Added to the escalation of tension over the takeover bid for Banco Sabadell, with the Minister of Economy, Carlos Body, reiterating his rejection of the operation in the presence of the president of BBVA, Carlos Torres, were the doubts about the banking sector after the promotion of the far right in the European elections, with the French banks as the main victims.

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The Basque group is optimistic about the final result of the takeover bid, but investors are not all for it.

The doubts not only reached equities, since default insurance against BBVA’s five-year debt (known as CDS) widened the differential to 74 basis points, the highest since March of this year, reflecting the uncertainty of the operation.

BBVA, at 10% of the annual minimums

Everything has gotten worse for BBVA since the bank chose to launch a hostile takeover bid on May 9. Since then, the price has plummeted more than 12 percent.

The experts consulted by Finanzas.com believe that this is not the best way to unblock the operation. To begin with, it increases execution risks, since BBVA will only have access to Banco Sabadell’s books after the takeover bid has concluded, which means the bank could find itself with final adjustments that it had not previously estimated.

At the same time, “a hostile takeover suggests the possibility of further government opposition,” JB Capital Markets analysts added.

In theory, the executive should only speak out once the CNMV has authorized the takeover bid, to approve, or, where appropriate, reject, the merger plan that BBVA intends. However, Law 10/2014 of June 26 on the organization, supervision and solvency of financial entities allows the government to also examine the public offer.

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Takeover bid until mid-2025

Specifically, according to the twelfth additional provision of this regulation, “it will be the responsibility of the Ministry of Economy and Competitiveness to authorize merger, division or global or partial operations of assets and liabilities in which a bank intervenes.”

To do this, the executive has a period that could extend between six and twelve months, once the ECB, the Bank of Spain, the CNMV, and the British markets regulator have already ruled. In this way, it is very likely that the takeover bid will extend until mid-2025.

But this is a certainly optimistic forecast, since as Exane BNP Paribas analysts pointed out, the operation could be closed in mid-2026, and not in 2025 as BBVA maintains.”

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The technology and operations of both banks must be integrated, in addition to negotiating with the unions. “If we rely on the merger between Bankia and Caixabank, which we believe was executed perfectly, this could take about four or five more months, which would take us until mid-2026,” the French bank said.

With such a schedule on the horizon, BBVA shareholders will have to prepare for another year of uncertainty and volatility, unless the entity chaired by Carlos Torres tries to return to the friendly path, as suggested by the sources consulted.

BBVA would lose commercial focus

The problem is not only the deadline, but the “significant” amount of resources that BBVA will have to dedicate to the takeover bid to execute it perfectly, added Exane BNP Paribas.

This would cause the Basque group to lose its commercial focus, which would give room to competing entities to take advantage, particularly Caixabank and Bankinter, but also Unicaja, Ibercaja or Abanca.

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For this reason, the sources consulted do not rule out BBVA improving the offer for Banco Sabadell by 10 percent, a consideration that would be paid in cash. Again, the bank would have to put more resources on the table, which works against the performance of the shares.

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